October 05, 2011

Submission by Patrick F. McCartan, April 1999 - Center for Professional Responsibility

Submission by Patrick F. McCartan, Managing Partner,
the law firm of Jones, Day, Reavis & Pogue
to the Commission on Multidisciplinary Practice
of the American Bar Association

April 1, 1999

Consider this assessment of the state of the legal profession:

Lawyers are now to a greater extent than formerly business men, a part of the great organized system of industrial and financial enterprise. They are less than formerly the students of a particular kind of learning, the practitioner of a particular art. And they do not seem to be so much of a distinct professional class.

Except for the reference to business "men," you might think that we had pulled down this quotation from your Commission's Internet webpage of testimony, but in fact it represents one concerned view from 1905, as reported by Louis Brandeis. The tug and pull between professional independence and the perceived needs of the marketplace are not new. The debate about Multidisciplinary Practice raises this issue once again, but the reason why we can still articulate our concerns in terms similar to those of Brandeis is that the struggle for professionalism in the bar has not yet been lost to the "unstoppable" logic of the marketplace.

What is "professionalism"? This definition, quoted by the ABA's 1986 Commission on Professionalism, captures the tension to which I refer:

A profession is not a business. It is distinguished by the requirements of extensive formal training and learning, admission to practice by qualifying licensure, a code of ethics imposing standards qualitatively and extensively beyond those that prevail or are tolerated in the marketplace, a system for discipline of its members for violation of the code of ethics, a duty to subordinate financial reward to social responsibility, and, notably, an obligation on its members, even in nonprofessional matters, to conduct themselves as members of a learned, disciplined, and honorable occupation.

With this definition in mind, let us see how, under the leadership of the American Bar Association, professionalism has been the guiding force in the evolution of the bar.

Shortly after Brandeis gave the speech I quoted, the ABA promulgated its 32 Canons of Professional Ethics, our first national model for legal ethics. In 1969 the House of Delegates adopted the Model Code of Professional Responsibility. The Model Code brought the lofty philosophy of the 32 Canons down to earth. The Model Rules of Professional Conduct updated the Code in 1983, replacing some of the aspirational tone with even more concrete guidance. An important purpose of both Model Code and Model Rules was to make their provisions more clearly enforceable. Each gained wide acceptance among the states.

Notable among the innovations of the Model Rules was Rule 5.1, holding supervisory attorneys and partners to a standard of care. This rule arises from a practical understanding of the way that organizations work. Even professionals do not work in splendid isolation; ethical compliance turns on organizational guidance - or neglect.

A parallel and related development to rule-making has been the modernization of the attorney disciplinary process, again, under the ABA's leadership. Responding to consumer discontent, the ABA Special Committee on Evaluation of Disciplinary Enforcement, chaired by former Justice Tom C. Clark, reported in 1970 "the existence of a scandalous situation" that required "the immediate attention of the bar":

Disciplinary action is practically nonexistent in many jurisdictions; practices and procedures are antiquated; many disciplinary agencies have little power to take effective steps against malefactors.

Following the Clark Report, the ABA led the drive to tighten enforcement standards with the adoption in 1979 of lawyer discipline standards and model rules. Again, broad acceptance by the states was the hallmark of the ABA's success.

Responding to public discontent, we have made our rules more concrete and have strengthened enforcement, but we have never conceded that blackletter rules are the outer boundary of our professional identity. In 1992 the ABA's Commission on Evaluation of Disciplinary Enforcement sought ways to broaden the scope of consumer protection by looking to matters that cause discontent with the legal system, but are not necessarily violations of specific rules. The Stanley Commission's Report on Professionalism in 1986 had reminded us to aim higher than the minimum set forth in written rules:

Resolve to abide by higher standards of conduct than the minimum required by the Code of Professional Responsibility and the Model Rules of Professional Conduct.

Surely, it is not too much to call on the American Bar Association and its members to reach for such a goal. The minimum standards are important, indeed essential, to uphold; but leadership, example and inspiration are needed as well. We call on the American Bar Association to provide the leadership and the example, which in turn will provide the inspiration. (Emphasis in original.)

In sum, since the time of Brandeis, our Association has sought to:

  • Define professionalism in terms of the public interest,
  • Make the rules clearer and more enforceable,
  • Broaden the disciplinary focus to include organizations, not only individual lawyers,
  • Make disciplinary enforcement more effective, and
  • Recommit the bar to the principle that professionalism means more than simply following the rules.

This is the backdrop for today's important reassessment of professionalism and the marketplace. Let us now consider the possibility of permitting a Multidisciplinary Practice (MDP). We will discuss in particular the four hypothetical structures identified by the Commission (Models 2-5; Model 1 is the status quo).

Some have dismissed as sloganeering phrases offered in support of MDPs, such as "one-stop shopping" and "seamless service." Let's be realistic: these are authentic trends in today's global markets, and we must not ignore them. We see these forces at work in some major businesses that we represent. In fact, one-stop shopping has been involved in the growth of our own law firm, which provides a full range of legal service in many locations around the world.

So we must ask ourselves: Can the bar justify an exception to what appears to be a market trend? Can it be that we, among all professions, should stand apart from what Brandeis called "the great organized system of industrial and financial enterprise," represented in today's debate by Multidisciplinary Practices?

My answer is that we can and we must preserve the independence of our profession and reject this trend in all its proposed models - even those characterized as "modest reforms." We must ask whether the quality and the independence prized in the American bar today would prevail if each model were adopted.

Model 5 C The Fully Integrated Model. Under Model 5, the rules would permit an MDP controlled by non-lawyers to offer legal services. Many of your speakers have eloquently attacked this model, but further observations are in order about Model 5.

Nothing less than a paradigm shift would be necessary to adjust our ethical rules to Model 5's structure. According to some speakers, it is high time that we focus ethical concern entirely on individuals and away from organizations. Lawyers in the MDP would be answerable to their own codes, accountants to another, and so forth.

Individuals, of course, are the ultimate objects of disciplinary concern, but the proposed shift in focus overlooks the insights the bar has gained from defining and enforcing professional standards. Far from being a vestige of another era, Model Rule 5.1, which holds supervisory attorneys and partners accountable for the work of subordinates, was adopted in the 1980s. It, and its companion rules, arose from the realization that individuals work in organizations, that organizations offer incentives and disincentives for professionalism and that therefore organizations are a key to compliance. This is consistent with regulatory developments in general. "Failure to supervise" and "inadequate procedures" are common charges made by regulators today when they identify misconduct in industries such as banking and securities.

I cannot speak for other professions, but I doubt that lawyers would function at their ethical best in an MDP in which individual professionals march to the beat of their own ethical drummers. Compliance requires mutual reinforcement, peer support and clear institutional messages. Nor, of course, is it inevitable that the MDPs will be controlled by individuals whose specialties are governed by formalized code. Certified public accountants have their own rules, but many of the specialties included in today's professional services firms are not directly subject to professional codes or standards.

In any event, the disciplinary focus on the individual itself involves an additional difficulty. We understand that the licensed attorneys on the staffs of professional services firms today do not engage in the practice of law, as such, but offer advice to the firm's clients on matters such as business issues. I imagine that would be the case, to a certain extent, even if the rules permitted employees of MDPs to function as lawyers. So where would that leave the attorney disciplinary process? Will it not be a common defense to say, "I was not acting as a lawyer at the time in question, I was providing business advice"? You can see that the disciplinary focus could be even narrower than we thought -- on the individual, but only to the extent that the individual is functioning as a lawyer at that moment. What about the "client" in that situation who believed that the "lawyer" was acting in a professional capacity and that their communications were privileged?

We acknowledge a desire by some consumers for one-stop shopping, but what about the vital consumer interest in holding attorneys accountable through an effective disciplinary process? The proposed narrowing focus overlooks what we know about organizational behavior and will make it harder to pin down attorney misconduct.

Let us also remember that professionalism also entails more than compliance with base-line written standards. It takes an institutional commitment for a law firm to aim high. At Jones, Day, Reavis & Pogue, we have adopted foundation values (Appendix 1) that articulate one firm's commitment. We know that professional services firms often make their own public service contributions, but what will happen when a lawyer or a group of lawyers in an MDP seeks budgetary approval for major pro bono work? When law is just one "function," one "profit-center" in a larger institution, firmwide interests may militate against aiming for loftier standards than those established by written rules and opinions and thereby subject to verification by those outside the profession.

I also question whether the profession's interest in offering competent services with adequate preparation will be maximized in an MDP. Preparation is not only an individualized responsibility; we all know that practicing in teams and in firms can elicit a sense of collective responsibility, heightened performance and pride in the result. We remain a learned profession, and I doubt that the formalized programs and written guidelines that would be the necessary benchmarks of competence in a large multiprofessional organization could fully substitute for these factors.

Model 5, I believe, will compromise attorney-client privilege. The fundamental policy underlying the attorney-client privilege is "that people will not seek a lawyer's advice if they fear that their communications with the lawyer may be revealed to unfriendly third parties. Cases can be effectively handled only if all the facts known to the client are also made available to the attorney." Of course, rules could be written regarding the non-imputation of information from one business line to another. "Firewalls" could be erected in the technology systems; "screens" could set one working group apart from another. Clients of every business line could receive full disclosure. But could all these arrangements stand up to the only test that matters, the test of the client's utter confidence? Again, shifting the responsibility from the firm to the individual is no answer and puts the privilege at risk. Collective responsibility is the best way to foster compliance and to win the trust of the client.

It is conceded that the fully-integrated firm represented by Model 5 also will require a wholesale revision of our rules governing the imputation of conflicts of interest. This must be the case, or else the conflicts imputed by auditing clients or consulting clients to possible legal representations could tie the hands of the very large MDPs permitted by Model 5. Is the bar ready for this? Are our clients ready for wholesale change?

Dealing with potential conflicts occupies a great deal of my time as managing partner of one of the world's largest law partnerships with locations in four continents. This is time well spent. The internal questions we raise, the representations we turn down, the waivers that we seek, the safeguards that we put in place - all of these are indicative not of antiquated rules that should be swept aside but of genuine client demands for uncompromised, conflict-free representation. Without going into details, I can report to you that clients sometimes turn down requests to waive potential conflicts and that clients are seldom indifferent to these requests, including even the sophisticated global businesses that are said to seek one-stop shopping. My experience tells me that clients are not ready for wholesale change in the law of imputation of conflicts of interest.

Finally, Model 5 seriously compromises our notion of undivided loyalty to the client by creating possible economic pressures that could undermine independent judgment by the lawyer. There is nothing new, of course, about conflicts between loyalty and the bottom line. We feel bottom-line pressures at large law firms, but perhaps nobody feels this more acutely than the solo practitioner who must withdraw from representing a major client for ethical reasons. But what the client expects and the legal system requires is the independent judgment that undivided loyalty fosters. Without the lawyer's independent judgment, the client has nothing.

An MDP adds unacceptable complications and new temptations to the age-old problem of delivering independent judgment. The MDP involves fee-sharing with colleagues from other specialties that may not share the lawyer's version of undivided client loyalty and who, if the conflicts rules are recast, might not even share a technical duty of loyalty to the lawyer's client. The MDP builds in economic considerations, unrelated to the practice of law, that can bring institutional considerations to bear on the lawyer or tempt the lawyer himself or herself, to consider such considerations.

I am confident that your Commission will reject Model 5, the fully-integrated MDP, as posing risks to the core values of our profession.

Models 2-4. I am troubled that some speakers who have so eloquently attacked your Model 5 have posited that with appropriate safeguards your Models 2-4 could work. That hypothesis is based on an incomplete understanding of how organizations operate, because the dangers of Model 5 also lurk in Models 2-4. Let me highlight some of the problems that the variations in formal structure offered by Models 2-4 do not solve.

Model 4 -- The Contract Model. Model 4 is essentially a joint venture governed by contract. The law firm and the professional services firm retain their own formal structures but contract with each other for business referrals, advertising and back-office services. The problem with Model 4 is that the very benefits that the relationship confers on the law firm would have a multiplier effect on the bottom-line pressures on professionalism that already exist today.

Consider what would happen when a lawyer ought to advise a client against taking an action. A lawyer always risks losing a client -- either by resignation or dismissal -- every time the lawyer says "no" on an important issue. The stakes would be higher if the client also were the professional service firm's largest auditing or consulting client. The temptation within the law firm even as a supposedly independent entity could be great to find an accommodation and not damage its valuable relationship with its joint venture partner.

The fact that under Model 4, the head of the law firm is always a lawyer is not an adequate safeguard. My misgivings about Model 5 were not expressed in terms of the non-lawyer manager directing the lawyer to cut corners. I would not expect this from the leading professional services firms, firms that we know well and respect highly. We represent them, work beside them on client matters and employ them when we need consulting and accounting services.

No, the multiplier effect to which I refer does not turn on "Who's the boss?" It arises, for example, from the subjective pressures felt by the lawyer - not imposed by the boss - to cut corners in the name of the bottom line because the lawyer understands the importance of the joint venture to the law firm's well-being.

After, say, five years of being in a joint venture with one of the professional services firms that now lead the field, what would happen as contract renewal time approaches? At that point, saying "no" to a renewal may be inconceivable, because the law firm's business prospects would be so entwined with those of the MDP that divorce would be unthinkable. Imagine the weak bargaining power that a law firm would have on the terms of renewal if the law firm repeatedly had cost the MDP business by taking ethical positions, particularly those that could not be tied to blackletter rules.

Make no mistake about it: if any misgivings prevent you from supporting Model 5, then you should not support Model 4 - even with the "safeguard" of a separate formal structure. Model 4's joint venture structure creates a valuable economic relationship that magnifies the consequences to a law firm of exercising its independent judgment.

Model 3 -- The Ancillary Business Model. Here, the supposed safeguard is that the lawyers are entirely in charge. Clients will be told that the ancillary business does not offer legal services and is distinct from that of the law firm. Significantly, however, "[l]awyers and nonlawyer professionals are partners in the ancillary business, sharing fees and jointly making management decisions."

Even with lawyers in charge, when profits derive from activities that are not subject to the canons and traditions of our profession, there will arise inevitable pressures on the lawyers to tailor their conduct to their broad business interests. Nothing in this model will prevent the ancillary activities, whether economic forecasting, consulting services or human resource support, from dominating the firm's profits. In fact, that may be the "law" firm's business plan. When that happens, then we are back in the familiar territory of Model 5 and Model 4, where the bottom-line economic realities will test the lawyer's conscience. How do you tell the firm's leading economic consulting client that it will need to find a new law firm because of advice the lawyers believe they must render? Again, the other business lines would raise the cost of exercising independent legal judgment.

Model 2 -- The Command and Control Model. Following Rule 5.4 of the District of Columbia Rules of Professional Conduct, the MDP must have "as its sole purpose providing legal services to clients." All owners are bound by the rules of professional conduct applicable to lawyers; and the lawyer-owners/lawyer-managers of the MDP are "responsible for the nonlawyer participants to the same extent as if [the latter] were lawyers." In other words, members of the legal profession and their non-lawyer partners or co-owners all are in the business of "providing legal services to clients."

Here, you might think that safeguards would alleviate all the concerns I have raised above, but in fact they do not. I submit that even when the lawyers are in charge and even when the whole firm is subject to the standards of conduct of the legal profession, there will be unacceptable pressures on the lawyers when the success of the non-lawyer profit center is at issue. There will be a business cost to saying "no" to a legal client, when the firm's highly profitable document preparation business line or research services group are dependent on that client's business.

To those who regard a change at least to Model 2 as inevitable, I commend to your attention the fate of Rule 5.4 of the District of Columbia. This rule permits partnership and fee sharing with non-lawyers and is the Commission's source for Model 2. The D.C. rule has been in effect for eight years, but not one state has adopted it. The rule has been widely publicized, widely discussed . . . and universally rejected or ignored by the 50 states.

The ABA's leadership in the field of ethics and discipline, as the voice of the American bar, has prevailed in part because of a clear understanding of the needs of the bar and bench. The ABA's recommendations are not self-executing; the several states remain sovereign in the area of legal ethics, and properly so. I would caution you about misplaced notions that some kind of change of in this area is inevitable, so it is best that we guide it. Given the fact that D.C. Rule 5.4 stands alone, I submit there is no inevitability for even "modest" change.

Conclusion. The American legal profession should resist the market development represented by Multidisciplinary Partnerships. This is not the only important respect in which we can and should stand apart, both from the other professional groups in the United States and from our brothers and sisters in the bar in many other countries. We also are exceptional in having self-regulation, a privilege we can only assure through our ability to police ourselves and serve the public good.

The history of the American bar is also distinctive in the singular services that we have contributed throughout the history of our republic. Remember, for example, the call to the bar by President John F. Kennedy in 1963. He asked firms to send lawyers to the South, and the Lawyers' Committee for Civil Rights Under Law sprang into existence, led by luminaries such as the Association's late President, Bernard G. Segal, and my late partner, and former Dean of The Harvard Law School, Erwin N. Griswold. Law firms dedicated their resources and their lawyers to this effort, at considerable cost and with great courage.

Despite all the changes in the legal marketplace, I am confident that law firms today retain a commitment to public service. If the forces of the marketplace are truly unstoppable, then for the sake of our profession and for the sake of our nation, we can only hope that the law departments of MDPs would respond in kind to the clarion call of public service and professionalism.



Every successful institution is built upon a foundation of certain values which all members of that institution share and accept as guidelines for their behavior and their collective and individual decisions. The basic values which have been at the foundation of Jones Day from its inception will continue to provide the foundation of the Firm in the future. These "First Principles" of the Firm may be stated as follows:

Integrity, both individually and institutionally, in dealings with our clients, the courts, our adversaries, and among ourselves;

A sense of personal accountability for every decision, judgment, and action on behalf of our clients or the Firm;

A level of competence which is marked by creativity and judgment that makes the quality and value of our services distinctive, and which our lawyers will enhance by continued professional growth;

A dedication to our clients' interests and an intensity of effort on their behalf, which distinguish our lawyers from others in the profession;

An independence which does not detract from dedication to the interests of our clients but which will always enable us to determine, and to advise, what is in their best interests;

Courage in representing our clients in hostile and sometimes individually threatening environments;

An understanding of our clients that will make us more sensitive to their concerns and objectives and a discipline that will make us more responsive to their needs;

A determination to provide quality legal services to our clients with real efficiency and within an organization structured to facilitate, rather than to impede, the achievement of these objectives;

A true unity of purpose among our lawyers which places the welfare of our clients and the Firm above that of any practice, region, office or individual; and

Commitment to this Firm as a professional endeavor, composed of people who have the same professional values and aspirations, the most important of which are set forth above.

The success of the Firm as an institution has been achieved because of each lawyer's and staff member's adherence to these principles. Integrity is the most basic demand we make of each other; it is simple honesty in all dealings; and it is an uncompromising, nonnegotiable demand. Accountability, as the statement makes clear, is the willing acceptance of personal responsibility for every aspect and detail of one's own practice, the services rendered to our clients, and the professional reputation of the Firm. Integrity is a principle seldom tested; accountability is an almost hourly responsibility, as we make decisions, fulfill obligations, exercise our judgment, take action, and delegate various tasks on behalf of our clients and the Firm throughout each working day.

The ever-changing requirements and service techniques of the contemporary marketplace, while they cannot be ignored, cannot be substituted for competence as the basis of the services we provide. Mere competence, however, is not enough. For the practice we have chosen to pursue, success depends not only on high levels of professional knowledge, but also on the judgment, creativity, and skill to use that knowledge for the benefit of our clients in the solution of their problems and the resolution of controversies in which they become engaged. Indeed, these additional factors are a great part of the value that our lawyers add to client service.

Individual lawyers must also continue to grow professionally -- to seek levels of professional accomplishment which are at the forefront of their practices, a process of continuing self improvement and unfailing awareness of current developments in their discipline -- for as the complexity of client problems increases, the standard against which the work of the Firm is judged changes. Moreover, clients today expect not only superior legal skills, but also an intimate understanding of the industry and business environment in which they function and a focus on the efficient accomplishment of their objectives in every engagement. What Jones Day expects of its lawyers today is a commitment to the legitimate interests of these clients and an intensity of effort which clients, courts, and other counsel will immediately recognize sets this Firm and its lawyers apart from others in the profession.

Independence is, of course, the dominant trait of the true professional and the primary reason we have elected to practice law in preference to other occupations. Independence, like competence, is what brings clients to Jones Day and keeps them coming. Independence in no way dilutes our dedication to the affairs of our clients. It does, however, require us to determine and to advise, clinically and dispassionately, what is in the client's interest within the limits of applicable legal and ethical principles. It is a quality closely aligned with courage, which requires that we remain resolute under the most trying circumstances, even where there is a risk to us individually or collectively in advancing our clients' interests, or losing clients because of carefully considered and correct advice they cannot accept.

These values apply equally to our staff who must also make superior client service a priority. An institution can prosper only if all of its personnel share the same vision and commitment. The accomplishment of our objectives as a Firm requires an abiding loyalty from each of us to the Firm as a whole and unrelenting insistence on the necessary cooperation of all personnel to deliver the best of the Firm to every client engagement. We cannot permit the size, success, or structure of the Firm to obscure the fact that, at its core, the Firm is the individual who provides client service with talent, industry and dedication. The Firm as an institution plays only a unifying and supporting role: to help identify essential client needs, to facilitate and support client service, to develop and reward distinguished individuals, and to foster a binding confidence in us among our clients and in each other among ourselves.